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Dogecoin. You may have come across that word and if not, trust me you probably will in the near future. So, what is Dogecoin? By today’s standards, I can call it the latest hot product in the cryptocurrency market.
DOGE, as the cryptocurrency is referred to, was released in the year 2013 by both Billy Markus and Jackson Palme as a meme coin meant to ridicule other coins that were promising to take over the world.
Among them is Bitcoin. This was the time when cryptocurrencies were being introduced and there was so much hype about their potential.
Dogecoin was supposed to be a crypto-like coin meant to make fun of the existing mainstream crypto coins just as the world was being introduced to the crypto era.
Today, the coin has evolved and is recognized as one of the top cryptocurrency coins in popularity. To explain the success of Dogecoin, Kindly look at the below graph and analyze its price change within the first five months of 2021.
This is in comparison with the other top currencies. One thing is clear, Doge has outdone all of them in price growth.
Part of the reason for skyrocketing of Dogecoin is the effect of influencers. There has been growing support both by celebrities and business leaders.
Some of them are Elon Musk, Mark Cuban, and Snoop Dog. They have been openly marketing the coin adding to the already existing excitement.
It is a rule in the financial markets that investors tend to follow industrial shapers. This has played a major role in pushing demand for the coins hence the increase in price.
One of the key factors to understand about Cryptocurrencies is the aspect of demand and supply. Some are capped while others are unlimited.
Dogecoin is one of the coins with an unlimited supply. However, there is a limit of how many could be mined per year. Initially, there were no limitations in supply up to the first 100 Billion coins, then the supply would be capped at 5 billion per year.
This means that doubling the first 100 billion would take at least 20 years. These supply limitations play a key role in controlling price and pushing accessibility.
Just like other currencies, you can acquire dogecoins through either buying, trading, or mining.
There are not many uses of Dogecoin today. This is because acceptability and uptake are still minimal. However, it is mainly used for tipping purposes and as a speculative asset.
It is good to note that cryptocurrencies are still in their early stages and hence most policymakers are taking a wait-and-see approach before making their legal instruments.
This has slowed them acting as acceptable legal currencies hence limiting their uptake by the mainstream businesses. Another factor limiting its usage ability is volatility.
Dogecoin is easily influenced by both micro and macro factors making it unreliable and unstable when compared with the regular fiat currency. Volatile price movements are lucrative to the traders but not for the overall use as a currency.
We are still at the early stage of cryptocurrency adoption. Most are still less than a decade old and hence it is too soon to make a conclusive opinion about their future.
However, there are a number of factors that we can rely on to infer. One is the future price of the coin. The unlimited supply aspect of the coin makes it risky holding for the long term. Unlike other coins like bitcoin who have a fixed supply.
The more supply comes online, the more demand is suppressed triggering inflationary issues for the long-term investors. Government regulations could also play a key role in shaping the future of these currencies.
Today, there are several countries that have banned them including China, Turkey, Bolivia, Algeria, and Nigeria. This reduces in a big way their global acceptability.
Without global acceptability and support by governments, the future of dogecoin remains bleak. On the positive aspect, there is a huge need and opportunity for decentralization.
Internet and blockchain are helping open up the financial world and reduce the level of control by central entities and governments.
This opening up is good for business and financial inclusion hence the continued rise in DOGE interest. With these facts, it is key to note that Dogecoin could be a profitable financial asset for short-term investment however, its long-term worthiness is in doubt due to the aspect of regulations and potential inflation.
As an investor, it is always advisable to invest what you are willing to lose. What are your thoughts on Dogecoin? Let me know in the comment section below.